Reference no: EM132507645

Question 1: Which of the following is an advantage of participative budgeting?

a. Focuses on knowledge of upper management

b. Eliminates 'gaming of the system' by managers and employees

c. Time-consuming

d. Leverages local knowledge

Question 2: When creating the master budget, managers usually start with the sales budget.

a.True

b. False

Question 3: Which of the following is true about the sales budget?

a. Is specific to a particular time period

b. Must be separated into product-line specific budgets

c. Driven by planned production

d. Focused on the long-term

Question 4: Which of the following is true?

a. The production budget drives the selling and administrative cost budget.

b. Managers usually prepare the sales budget after the capital expenditures budget.

c. Budgeting is a linear process.

d. Creating the budgeted income statement may lead to a revision to the sales budget.

Question 4: Once a manager completes the budgeted income statement, they can adjust the budget to set a different target net income by revising the sales, production, and component budgets.

a.True

b. False

Question 6: Which of the following is true regarding the cash budget?

a. It summarizes all cash inflows and outflows.

b. It is prepared using accrual accounting.

c. It focuses on financing.

d. It ignores cash balances.

Question 7: Wish Corporation managers require a minimum monthly cash balance of $25,000. At the beginning of the second quarter of the upcoming year, the cash balance is $27,000. Half of the $424,000 in sales from last quarter will be collected during Q2. Expected disbursements are budgeted at $220,000.

What do the managers learn from the cash budget for Q2?

a. The cash balance will be reduced during Q2, but no financing will be necessary.

b. The cash balance at the end of Q2 is double the cash balance at the beginning of Q2.

c. The company will need to obtain financing during Q2.

d. The company will need to obtain financing during Q3.

Question 8: Capital budgeting measures are intended to facilitate investment decisions involving a single investment option.

a. True

b. False

Question 9: Which of the following capital investment measures does not rely on the time value of money?

a. Internal rate of return

b. Net present value

c. Payback period

d. None of the above

Question 10: Which of the following measures facilitate capital investment decisions? (Check all that apply.)

Net present value

External rate of return

Payback period